Republic of the Philippines

COMMISSION ON AUDIT
NATIONAL GOVERNMENT SECTOR
Cluster 5 – Education and Employment
Commonwealth Avenue, Quezon City

INDEPENDENT AUDITOR’S REPORT

The Chairman Designate

Polytechnic University of the Philippines Board of Regents
Commission on Higher Education
Higher Education Development Center Building
C.P. Garcia Street, U.P. Diliman
Quezon City

The President
Polytechnic University of the Philippines
Sta. Mesa, Manila

Opinion

We have audited the accompanying financial statements of the Polytechnic University of

the Philippines (PUP), which comprise the Statement of Financial Position as at
December 31, 2017, and the Statements of Financial Performance, Changes in Net
Assets/Equity, Cash Flows, Comparison of Budget and Actual Amounts and Notes to
Financial Statements, including a summary of significant accounting policies and other
explanatory information.

In our opinion, except for the effects of the matters described in the Basis for Qualified
Opinion section of our report, the financial statements present fairly, in all material
respects, the financial position of the Polytechnic University of the Philippines as at
December 31, 2017, and its financial performance, changes in net assets/equity, cash
flows, comparison of budget and actual amounts, and notes to financial statements for the
year then ended in accordance with the Philippine Public Sector Accounting Standards
(PPSASs).

Basis for Qualified Opinion

As discussed in Part II of this report, the following audit observations affected the fair
presentation of the financial statements of the PUP, to wit:

1. The Property, Plant and Equipment (PPE) account with a reported carrying
amount of ₱1,448,384,056.07 representing 68.89 percent of the total assets were
doubtful as to valuation, accuracy and existence due to, among others, eight
untitled parcels of land acquired thru donation and being used in its operations
which remained unrecorded in the agency books; undetermined exact carrying
 value of building that was demolished in CY 2010 which is still reflected in the
agency books; continued presence of unaccounted beginning balances totalling
₱419,859,780.52; and non-submission of a comprehensive Report on Physical
Count of Property, Plant and Equipment (RPCPPE) and non-maintenance of the
required substantial Property Cards, PPE Ledger Cards and Subsidiary Ledgers.

2. The Cash-in-Bank – Local Currency, Current Account (CIB-LCCA) of

₱512,837,808.28 is of doubtful validity due to; delayed/non-submission of
Monthly Bank Reconciliation Statements (BRS) that resulted to unreconciled net
variance of ₱237,621,112.83 between bank and book balances; dormant PNB
bank accounts amounting to ₱7,145,375.08 that were transferred/deposited to the
PUP Regular Trust Fund account maintained at LBP without proper
documentation of the JEV; and doubtful existence and ownership of two dormant
bank accounts totalling ₱480,600.54. Further, investment in High-Yield Savings
Account of ₱230,000,000.00 sourced from Special Trust fund lacked concrete and
detailed investment plan of the projects that will be funded from its earnings.

3. The Inventory Accounts totalling to ₱60,790,557.53 is of doubtful validity due to:

unrecorded Office Supplies Inventory amounting to ₱3,663,135.08 that
understated the account Office Supplies Inventory; dormant inventory accounts
amounting to ₱5,921,520.20 due to non-existing inventories; existence of
expired/obsolete inventory items in the stockroom of the Asset Management
Office (AMO) and still carried in the books; improper maintenance of Supplies
Ledger Cards (SLC) by the Accounting Office and Stock Cards (SC) by the AMO,
thus, correctness and completeness of the Inventory Balance in quantity cannot be
ascertained; and non-submission and reconciliation of the prescribed Report on
the Physical Count of Inventories (RPCI) as at year-end by the AMO with the
records of the Accounting unit.

4. The Accounts Payable of ₱105,537,252.20 is of doubtful validity due to: inclusion

of obligated Contracts/POs on goods and services not yet delivered or rendered
which overstated the A/P account by ₱3,350,884.82; incurrence of obligations in
CY 2017 in the absence of duly approved Contract/POs and conforme by the
supplier that overstated the account by ₱13,279,056.50; and inclusion of cancelled
POs and liabilities deemed paid totalling ₱828,102.29.

We conducted our audit in accordance with International Standards of Supreme Audit

Institutions (ISSAIs). Our responsibilities under those standards are further described in
the Auditor’s Responsibilities for the Audit of the Financial Statements section of our
report. We are independent of PUP in accordance with the Code of Ethics for
Government Auditors in the Philippines (Code of Ethics) together with the ethical
requirements that are relevant to our audits of the financial statements in the Philippines,
and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the Code of Ethics. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our qualified opinion.

2
Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial
statements in accordance with PPSASs, and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.

Those charge of governance are responsible for overseeing PUP’s financial reporting
process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatements, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs will
always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions or users taken on the basis of
these financial statements.

Our audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatements of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the agency’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the agency’s internal control. Our audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by
Management, as well as evaluating the overall presentation of the financial statements.

COMMISSION ON AUDIT

By:

CYNTHIA M. EVASCO
State Auditor V
Supervising Auditor
Other SUCs Audit Group

June 14, 2018